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Global Business Travel Accident Coverage:
What You Need to Know
RICK ORTIZLockton Global Benefits Practice
LOGAN PAYNELockton Global Client Services
September 2014 • Lockton Companies
L O C K T O N C O M P A N I E S
JENNIFER ARMSLockton Global Benefits Practice
Business Travel Accident (BTA) insurance is an important
benefit for many companies, particularly those with
employees who frequently travel internationally on
company business. BTA is a supplemental insurance
policy providing both occupational and non-occupational
accident and health cover to a company’s employees (and
often their dependent spouses and children) in the event
of a covered injury or illness arising while traveling on
company business.
For some companies, risk management handles any business travel coverage, along with workers’ compensation and other employer insurances. For other companies, human resources manages the business travel program in consideration of the accidental death and dismemberment benefit for employees, a fundamental aspect of an insured BTA plan. Regardless of who is responsible for these insurance programs, structuring a BTA program for a globally diverse workforce is challenging.
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Many BTA plans are designed to cover a company’s employees in one country. However, there are also various ways of structuring a business travel accident program for a globally diverse workforce. For employers considering a global policy for employees in several countries, they need to consider the legal and tax implications, their own business and risk tolerance, and any internal administrative hurdles or limitations of such an approach.
There are three main ways to cover a global population for business travel benefits. For the purposes of this discussion, we’ve assumed the viewpoint of a company headquartered in the U.S.
Local Policies Only—Each country with local employees will have its own admitted policy with a local insurer based on standard market practice—no global policy exists here.
One Global Policy—One policy written out of the U.S. covering the entire international employee population, with no locally admitted policies.
Controlled Master Program—A hybrid approach where a global policy is written from the U.S. dovetailing with locally admitted policies placed in foreign jurisdictions.
The following are some considerations and implications of each method and the types of employers who would benefit from each.
LOCAL POLICIESFrom a compliance standpoint, the best way to offer
business travel coverage to local national employees
working in countries outside of the U.S. is to
implement local policies in each country of operation. This reduces legal issues arising from having non-admitted insurance, and mitigates tax concerns since claims payments take place locally and no money is repatriated across borders.
There are also various ways of structuring a
business travel accident program for a globally
diverse workforce
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September 2014 • Lockton Companies
From an employee perspective, local plans are best equipped to provide expected local benefits and offer a market standard level of coverage. Any interactions needed between an employee and the insurer are communicated under local terms, conditions, and language.
Potential downsides to this approach:
Adds administrative burden of tracking and handling all
policies. For companies operating in many locations and
languages, managing policies with different renewal
dates and premium collection procedures can be
difficult and time consuming.
Does not leverage the size and cumulative BTA premium
spend internationally.
Creates potential for gaps and variances between the
individual country policies and traveling employees.
Local solutions are best suited for companies that:
Have large enough populations to place local plans.
Are risk averse.
Have a decentralized governance model.
Are able to manage the administration of multiple plans.
Are not seeking consistent global coverage.
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ONE GLOBAL POLICYAdopting one policy that covers all employees is the traditional method of offering global coverage.
This approach simplifies administration, allows uniform coverage, and offers transparency of total costs with
potential cost savings. From a compliance perspective, the main disadvantage is that coverage may be considered
non-admitted insurance in many jurisdictions and thereby could be subject to legal and tax penalties. It is also
important to consider how claims payments under this structure will be handled. Typically, claim payments under
a global contract are made directly to the corporate headquarters. It is then responsible for paying the correct
beneficiary and managing any associated logistic or tax issues.
It can be difficult to offer a locally competitive travel benefit through U.S.-issued contracts because U.S. insurers are not able to offer certain expected benefits. For example, accident policies in the United Kingdom often include benefits for cancelled trips or lost luggage. U.S.-based policies cannot include this coverage, though there will still be an expectation of coverage by the U.K. employees.
One global policy would be best suited for companies that:
Have very small or dispersed international populations.
Want to offer uniform BTA coverage to all employees and have a larger risk appetite.
Are located only in countries that allow non-admitted insurance.
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September 2014 • Lockton Companies
CONTROLLED MASTER PROGRAMA relatively recent market development for BTA policies, controlled master programs (CMPs) have become more prominent because of the ability to offer a middle ground between having purely local policies or a single global policy. A CMP combines the best aspects of both by offering a more compliant method of insuring benefits while also maintaining one global standard of coverage.
CMPs offer centralized control to the parent company while also offering the benefit of local plans and conditions. These programs could include a master policy underwritten in the United States, along with locally admitted plans in each country where necessary. Other key characteristics of CMPs include:
Ability to work with a single insurer and affiliates.
Ability to provide locally admitted cover in many countries.
Increased regulatory compliance in local markets.
Consistent and standardized worldwide coverage as umbrella coverage above local policies, to fill any gaps as permitted by local law.
Centralized venue to collect premiums for many locations.
Common effective/renewal policy dates.
CMPs offer centralized control to the parent
company while also offering the benefit of local
policies and conditions.
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In practice, CMPs do alleviate some compliance risk, but they also come with other concerns. Critical issues with CMPs involve understanding of policy details and mitigating regulatory risk. The master contract may include difference in conditions/difference in limitations (DIC/DIL) language that states that the global plan will offer coverage above and beyond what the local plans are able to provide so that each employee is covered at desired levels. Thus considerations of the CMP may include:
Difference in conditions/difference in limitations provision causing noncompliance.
Additional frictional costs associated with implementing a CMP.
Conflict between corporate office and local offices caused by the corporate office exerting control centrally.
Limited insurance markets able to offer CMPs.
Confusion as to whether claims should be handled locally or in the U.S.
There are situations where it will not make sense to have the master policy issued from the U.S. interact with a local plan. Certain countries have legal limits on the sum insured for accident coverage, so offering benefits above what is available in the local market is illegal. The variation in typical wages and standards of living may also make a global coverage level inappropriate for employees in some locations. For example, a lump sum benefit of $250,000 may be competitive and appropriate for a U.S. employee, but it could be considered far too rich a benefit in developing markets.
It is unclear if having a local policy alongside a global plan will improve any compliance issues. Technically, the global plan is still non-admitted insurance. Certainly, any tax or logistical issues around securing payments to beneficiaries will still exist. Companies need to fully review the suitability of a CMP for their type of business, population size, international exposure, corporate risk philosophy, and compliance appetite.
Controlled master programs are best suited for companies who:
Are very large multinationals with a sophisticated global benefits and/or risk management team capable of fully understanding and assessing the legal, financial, and administrative risks.
Wish to have global control and purchasing power.
Wish to establish a baseline of coverage and benefits worldwide.
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September 2014 • Lockton Companies
BTA plans are being relied on more and more to offer travel protection and benefits to employees of multinational companies.
There are significant pros and cons to the different BTA plan structures, and companies should have a clear understanding of both when choosing the right configuration to protect their traveling employees. U.S. companies have traditionally contracted a global policy to cover all employees around the world or simply let each country purchase its own coverage. A CMP combining the benefits of each of these traditional models may be a viable solution for many multinational companies, but the pros and cons should be weighed carefully.
Contacts
For more information, please contact:
Jennifer Arms, Lockton Global Benefits Practice 202.414.2468 [email protected]
Rick Ortiz, Lockton Global Benefits Practice 415.568.4062 [email protected]
Logan Payne, Lockton Global Client Services 816.960.9617 [email protected]
The variation in typical wages may make
a global coverage level inappropriate in
some locations.
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